Wednesday, September 24, 2008

Gate Short Selling And Control The Market

The market has two faucets and a drain. Today we will talk about the faucets.

Warm water falls from one faucet, bringing encouragement to new ideas. This is the ordinary investment, held "long", where a person buys stock and holds it. As more people buy and hold a stock, enthusiasm can develop. Its cost can rise beyond its value.

Cold water falls from another faucet on overheated bubbles of enthusiasm. This investor sells the stock first, then buys it back once it falls. If it falls. He sells a lot of it to make it fall. Even now, there are ways that he can "short-sell" more stock than is in existence to make a company fall.

The SEC has suspended completely the short-selling of financial firms. They can only rise. Until the suspension expires. If it does.

If short-selling can be switched on and off, can it be gated?

Can the cold water be turned down just a little?

We're running out of hot...

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